doubling option

Doubling option

Doubling Option

A provision in some bond indentures allowing the issuer to repurchase up to twice the number of bonds specified in the indenture's sinking fund provision. That is, the doubling option allows the issuer to redeem a large number of bonds prematurely. The redemption occurs at face value, or close to it. The issuer usually exercises the doubling option when interest rates are low and it can re-issue the same bonds at less expense to itself. The doubling option reduces the return for investors.

doubling option

A provision in some indentures that allows the borrower, at his or her option, to retire twice as many bonds as stipulated under a sinking fund requirement. The additional retirements take place at or near par, so that the option is used during periods of low interest rates. Thus, the provision operates to the disadvantage of investors. Compare sinking fund provision. See also call provision.

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